Can 'free' online games make money?

A man plays online games at an Internet cafe in Beijing. Asian video game companies offer play for free, but charge for virtual goods such as weapons.

TEXT OF STORY

Kai Ryssdal: If you have kids who play video games online, or for that matter, if you play yourself, you know the drill. First you pay the monthly subscription fee -- 15 bucks a month or so. Then you get nickled and dimed to death for all those, virtual extras that you really have to have to play the game. This week, Sony said it was going to cut players a break. It's going to start offering one of its smash online fantasy games -- EverQuest II -- for free.

Marketplace's Jeff Tyler reports.


Jeff Tyler: The business model was born in Asia, where video game companies had trouble collecting subscription fees because of piracy.

Andrew Schneider is president of Live Gamer. He says the companies came up with an a la carte system.

Andrew Schneider: In order to mitigate against piracy, the item-based model was born. So that players would buy a virtual currency, and then use that virtual currency to buy weapons, gear, decorative items, avatars. All sorts of different virtual items within the game.

In China, Japan and Korea, millions of young men play online games for free. But Schneider says there is no limit to what they can spend on virtual goods like a better cyber sword or magic flying boots.

Schneider: They can spend $1,000 a month, $1,500 a month. And those types of numbers are often reported both in the Asian markets as well as the Western markets.

The growth in the virtual goods market in the U.S. is staggering. In the last three years, it's estimated to have gone from around $300 million to almost $2 billion this year. But don't expect video game companies to abandon the subscription model.

Greg Short is president of Electronic Entertainment Design and Research.

Greg Short: The investment to produce some of these games can be upwards of $50 to $75 million, before they even release the game and start making any money. So, the subscription model and traditional sale of goods model allowed them to recoup that investment relatively quickly if they could get critical mass.

In fact, the games being given away in this country often don't have huge paying audiences, which makes it easier for companies to give them away for free.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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